Dow Drops as Treasury Yields Rise, Market Anticipates Fed's Move

On Monday, the Dow Jones Industrial Average experienced a decline, mainly influenced by a slump in energy and utilities sectors. This was attributed to the continuous rise in Treasury yields following a last-minute funding measure that averted a U.S. government shutdown. While investor enthusiasm was low due to its short duration. The Dow fell by 0.2%, the S&P 500 remained flat, and the NASDAQ Composite rose by 0.7%.

As the S&P 500 companies prepared to report third-quarter results, the market anticipated a 1.6% rise in earnings compared to the previous year. The Nasdaq performed well, with Nvidia gaining 2.9% after being added to Goldman Sachs' conviction list. Despite some pressure on big tech from rising Treasury yields, Alphabet and Meta Platforms provided support.

In the bond markets, the 10-Year U.S. Treasury rates reached a fresh 16-year high, driven by expectations of another Federal Reserve rate hike. The 2-year Treasury yield rose to 5.098%, and the 10-year yield increased by 12 basis points to 4.696%.

Rate-sensitive utilities faced the largest one-day percentage decline since April 2020, falling by 4.7%. Notable utilities like Nextera Energy Inc and The AES Corporation led the sector downside. Energy also experienced a sharp decline due to lower oil prices.

The dollar strengthened, continuing its four-week gain, supported by the funding bill and positive economic data, as well as rising U.S. Treasury yields.

Looking ahead, investors awaited key employment data and speeches from Federal Reserve officials. September's economic data revealed a less significant decline than anticipated in U.S. factory activity, along with a rise in construction spending in August. Strong economic indicators in recent weeks strengthened expectations of prolonged elevated interest rates.

Investor sentiment was influenced by the maintenance of interest rates, with about 30% of traders expecting a Fed rate hike next month, up from 18% the previous week. Overall, the market remained vigilant about economic indicators, especially the upcoming U.S. jobs report, as they shaped expectations for the Federal Reserve's future monetary policy decisions. As a result, it is anticipated that the overall U.S. stock market will continue to experience an impact. Persistent pressure is still evident from extended bond yields and the economic downturn, coupled with a significant increase in government debt. Although there might be a minor correction following a recent sharp contraction.

Data for Technical Analysis (5H) CFD US30 DJIA

Resistance : 33460.3, 33509.4, 33589

Support : 33301.1, 33252, 33172.4                  

5H Outlook

Source: Investing.com                              

Buy/Long 1 If the support at the price range 33156.1 - 33301.1 is touched, but the support at 33301.1 cannot be broken, the TP may be set around 33510.6 and the SL around 33084.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 33460.3 - 33605.3, TP may be set around 33710.0 and SL around 33229.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 33460.3 - 33605.3 is touched, but the resistance at 33460.3 cannot be broken, the TP may be set around 33301.1 and the SL around 33678.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 33156.1 - 33301.1, TP may be set around 33110.0 and SL around 33533.0, or up to the risk appetite.       

Pivot Points Oct 3, 2023 02:33AM GMT